Norwegian Sovereign Wealth Fund Lost $21 Billion In First Half Of Year Amid Market Turmoil

Norway’s sovereign wealth fund – the Government Pension Fund of Norway – the largest such fund in the world, lost $21.27 billion in the first half of this year.

In contrast, last year the fund generated record profits of $180 billion.

Norges Bank Investment Management, or NBIM, which manages the $1.15 trillion fund, said on Tuesday that the fund’s equity investments dropped 6.8% in value over the first half of the year, its investments in real estate fell 1.6%, and its fixed income investments gained 5.1%.

The overall portfolio suffered a negative return of 3.4%.

Oil companies held by the fund were among its weakest performers, sliding 33.1%, while its tech holdings gained 14.2%, making the sector among the best performers.

As of June 30, 69.6% of the fund’s assets was invested in equities, 2.8% in real estate, and 27.6% in fixed income. The fund holds stakes in about 9,200 companies around the world.

“There were major fluctuations in the equity market in this period,” said Trond Grande, the deputy chief executive of NBIM. “The year started with optimism, but the outlook of the equity market quickly turned when the coronavirus started to spread globally. However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response. Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty.”

The sovereign wealth fund receives revenue from Norway’s huge oil and gas industry and now has a value three times the size of Norway’s annual gross domestic product.

In the first half of the year, the Norwegian government withdrew 167 billion kroner ($18.9 billion) from the fund to help support the domestic economy amid the pandemic.

After Norway’s fund, the largest sovereign wealth funds in the world are the China Investment Corporation and Abu Dhabi Investment Authority.

Meanwhile, the Norwegian fund is undergoing some turmoil in its executive ranks.

After Norway’s central bank appointed former hedge fund manager Nicolai Tangen to succeed longtime fund CEO Yngve Slyngstad, some government officials raised questions about the choice of Tangen. Among other things, as the owner of a hedge fund, Tangen faces conflicts of interest issues, including his use of tax havens. Before his appointment, Tangen gave his predecessor Slyngstad a free ride on his private luxury airplane, according to reports.

Norway’s largest opposition party, Labor, strongly opposes Tangen’s appointment.

For now, Tangen is scheduled to take over the fund on Sept. 1.

“Obviously it’s a situation that is something that you would have wanted to avoid,” Grande said at a press conference in Oslo on Tuesday, reported Bloomberg. “But hopefully we have built a reputation over more than 20 years that can also withstand some turmoil. We haven’t really heard any concerns from our business partners, directly.”